tv Nightly Business Report PBS January 5, 2011 7:00pm-7:30pm EST
the people voted to end business as usual and today we begin to carry out their instructions. ( applause ) >> susie: and with that, the balance of power shifts in congress as republicans take control of the house. >> tom: what the change could mean for the economy, corporate america and your portfolio. you're watching "nightly business report" for wednesday, january 5. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you.
captioning sponsored by wpbt >> susie: good evening everyone. it's a new day on capitol hill with the swearing in of the 112th congress. ohio republican john boehner was elected as house majority leader, ending four years of democratic control. as nancy pelosi passed the speaker's gavel to him, boehner said, "i'm still just me." >> tom: susie, that folksy demeanor may go by the wayside as boehner takes the lead on the people's business. that likely means we'll see fights over spending, namely on health care and the nation's massive red ink. >> susie: in his acceptance speech, senator boehner promised to make congress more transparent and to restore the american people's trust in the political system. he said, "a great deal of scar tissue has built up on both sides of the aisle."
>> tom: joining us now to talk more about the challenges facing the new congress, washington bureau chief darren gersh. darren, the republicans take over the u.s. house just as the government debt tops $14 trillion and races toward that debt ceiling. the fight is a few weeks away, but how does this shape the budget battle? >> yeah. that is the budget battle, the economic scar tissue, if you will. it is about to get a lot more interesting. the treasury usually when it is about to ask for debt ceiling increase sends up a letter to capitol hill complaining why it wants that. the interesting thing here, tom, is that the new members, the tea party members -- many of them have campaigned against voting for debt limit increase. so their price for going along is going to be deep budget cuts or some kind of rule change that is going to make it harder to
raise the deficit going forward. so this is going to be a tough battle and the one to watch. it is going to force the compromise on the budget. >> tom: you can bet the markets are obviously paying very close attention to this. clearly while congress makes the laws, the white house writes the rules for many agencies. how could congress try to influence rules from health care to financial reform? >> oh, they're getting ready for that. there are basically two ways they can do it. one is they can use the power of the purse. the president still has the veto pen. it will be hard for the congress to say, hey, we're not going to pay the salaries of the people who are going to write your regulations, mr. obama. the second way, which may be more effective, is oversight. basically the congress can call up the people writing the regulations, and ask them to spend a lot of time answering questions and defending their positions, and spend a lot of time talking to congress and not actually writing the rules. >> tom: let's get to
specific areas of the economy. the top regulatory issue you've identified here is health care, and the health care reform bill that was passed last year. how does it play out? >> absolutely. you might be stunned to know that the i.r.s. is the agency slated to actually enforce a lot of the health care reforms, if, in fact, they take effect. so you can imagine a new republican house is going to spend a lot of time delving into that, looking at how the rules are written, questioning them, asking why regulators are doing what they're doing. >> tom: okay. >> it is going to be a lot of attention there. >> tom: you're mentioning the volcker rule, which is banning banks from using their own money. it speaks to the overall approach that the white house is going to use in terms of these regulatory issues. is it going to pull these in the ground between the two parties? >> that is going to be a very tough battle. i don't know if it will poison the ground because a lot of that ground is already toxic, if you will. the treasury is supposed
to put out its version of the volcker rule actually this month. 'lot -- a lot of the republican members of the house -- they were on record during the legislative debate as saying the volcker rule would make it tougher on banks, hurt their profitability, and hurt lending. this keeps going. >> tom: that is does. onward and upward. from washington tonight, our bureau chief darren gersh. >> susie: here are the stories in tonight's n.b.r. newswheel: an upbeat report today showing a turnaround in the job market. data from payroll processing firm a.d.p. shows american businesses sharply increased hiring. private companies added nearly 300,000 jobs last month, much higher than the 140,000 jobs that economists expect in the government's employment report that comes out on friday. we'll have more about the jobs picture in a moment. stocks rose on the job news. the dow added 31 points, the nasdaq up nearly 21 and the s&p 500 gained six.
looking at trading volume, just over a billion shares moving on the n.y.s.e. and two billion on the nasdaq. and late today, the presidential commission investigating the b.p. oil spill said the disaster was unavoidable. the reason? management failures at b.p. and its partners on the project. transocean and halliburton. the commission also blasted the industry for poor safety practices, warning it could happen again unless something is done. >> tom: still ahead, some stock dividend ideas from our "street critique guest," and your emails. she's hilary kramer of gamechangerstocks.com. >> susie: more now on today's surprising payrolls report and the outlook for the job market. joining us, john challenger, c.e.o. of challenger, gray and christmas, the executive outplacement firm. john, nice to have you on the program. >> nice to be here, susie. >> susie: well, john, we -- you know that
payroll report showed the biggest gain in hiring since 2000. you do a lot of surveys, are you seeing that same kind of data come through in the su surveys you conduct? >> we are seeing that. the downsizing has been very low. in december, we saw just over 32,000 jobs cut. and we saw 579 for 2010. that was the lowest since 1997. >> susie: based on all of the people that you spoke to and all of your experiences in the job market. what are you expecting for this prim friday's job employment? will we see a big jump in job hiring. >> it rose from 9.6% to 9.8%, and it may come down as weekly jobless claims fall below 500,000. there is optimism this number could be better than expected. >> susie: you put out a list of industries that
announced in december that they're hiring. if you look there on the screen, at the top of the list the auto industry. followed by retail, and then government and non-profits, consumer products, and transportation. do you see this continuing through the year? or was this just a one one-month announcement? and do you expect other industries to announce more hiring? >> i'm more positive in 2011 we'll see a continuation of the job growth that is starting to occur. private sector businesses are creating jobs that create almost a million of them in 2010. that should accelerate in 2011. the real question is: will they be offset, some of the job gains, by the recession that seems to be coming in government jobs. even though we saw some gains there this month, i'm more concerned with the big deficits, especially at the state and local level, it will be tough to see real growth there. >> susie: and we've seen a lot of companies hiring
temporary workers. do you see them moving away from temps and going more into permanent, full-time hires? >> i do think we'll see more of that. when you're coming out of a recession, and now we've been out actually for 18 months. the first thing companies do as the demand starts to pick up, they bring on temporary workers. and as the business becomes more solid, they convert those temporary workers into full-timers. some companies are using more temporaries than they used to, but i believe many will get turned into full-time jobs. >> susie: any advice for the millions of workers going out now trying to find jobs? >> what's so important is to restart your search. there is a lot of long-term unemployed. 41% of the unemployed have been out more than six months. get that going again. get engaged in organizations outside of what you've been doing. don't just sit at home. it is so important to start that search afresh.
>> susie: okay. good advice. thank you so much, john. nice talking with you. >> susie: nice talking with you, susie. >> susie: we have been talking with john challenger, the c.e.o. of challenger, gray, and christmas. >> tom: stocks got a nice boost today thanks to the better than expected jobs status, some encouraging signs of growth in the services sector. let's get you updated in tonight's market focus.
while we saw stock buying, the stronger economic data had investors selling bonds, pushing interest rates up. let's roll out the last 90 sessions of the yield on the 10- year government bond. a move here to the high side. since the federal reserve started its bond-buying campaign, rates have been moving higher. tonight this is the top of its most recent range. right around 3.5%. as interest rates rise, bond prices fall. this exchange traded fund follows government bonds of 20 years or more. it has been on a steady move lower since august. off by 2.2% today, the high happening back in the fall. as economic data has stabilized and strengthened, bonds have been dropping. what does all this mean? this chart shows us what the impact has been on investor's appetite for bond mutual funds. this shows monthly money flows
into bonds and it has been falling off since the summer. as people have been peeling back investments in bonds. back to stocks, where the financial sector led the rally. inside the dow, american express jumped 2.5%. bank of america was up almost 2%. j.p. morgan gained more than 1%. all three moving higher on heavier-than-usual volume. but the biggest rally in the financial sector came again from a.i.g. the company continues trying to sell its taiwanese business, which got more complicated today with an alternative bid. be that as it may, that didn't hurt shares, jumping another 7% on more than twice its usual volume. this takes a.i.g. to a post- recession high. remember though, the stock did a big one-for-20 reverse split in 2009. a deal tonight in wireless technology. qualcomm will spend $3.1 billion in cash for wi-fi chip maker atheros. it values atheros at $45 per
share and is qualcomm's biggest acquisition, giving it a presence in making communication semiconductors for smartphones and tablet computers. no surprise the target of qualcomm's interest, atheros, rallied. although the market had clearly been expecting a deal, with shares moving earlier this week. qualcomm responded nicely to the deal, up 2%. this is a new 52-week high tonight. as we can see by the pulsating green dot here. qualcomm is one of those companies that has loads of cash. last quarter, more than $10 billion in cash. while we're talking technology, check out this move in graphics chip maker nvidia. almost 8% higher, moving to its highest price since april. it has rocketed higher lately. an analyst upgrade helped, as did an announcement that it is working on its first chip targeting basic computing, not just graphics. there may be more buyers interested in retailer j-crew. shares were up another 2% today, well over the $43.50 per share a private equity group has offered. bloomberg reports urban
outfitters and sears are considering competing offers. those stocks were split. finally, tasty baking, the company behind tasty kakes. the bakery is running out of dough, literally. its c.e.o. says liquidity is extremely tight. shares dove, losing more than a third of their value as it tries to refinance debt, raise money or maybe sell the company. and just to remind you, we have a video on our website explaining our new charts. n.b.r. on pbs.org. that's tonight's "market focus." >> susie: it's that time of year again for american companies: earnings season. beginning with alcoa on monday, the final quarter of 2010 is expected to be another impressive period for corporate america. suzanne pratt details what's likely for fourth quarter results. she also gives us an early peak at profit prospects for this year. >> talk a walk on a manhattan street, and you know the holiday season is over.
for corporate america, however, another season is just getting started. that's the quarterly ritual of u.s. companies sharing their profits and sales with wall street and the world. the final quarter of 2010 should not disappoint. s&p 500 firms are expected to report year over year earnings growth of 32%, capping off a solid year for corporate profits. earnings expert ashwani kaul says the impressive q4 number is less about easy comparisons and more about cost-cutting, now part of corporate d.n.a. >> obviously companies are still using these uncertain economic times to trim some fat and reduce their cost structure. but, there's still some topline demand. as for that topline demand, firms are expected to report revenue growth of 6%. but s&p's mike thompson says that level is anemic by historic standards. >> we've been in a cyclical, you know, single-digit range for almost a decade now.
but they're very modest. >> reporter: look for financials and basic materials to have the highest profit growth rate in the fourth quarter. those two sectors are likely to continue to be profit leaders this year, but the pace of earnings growth throughout corporate america is expected to slow. number crunchers forecast only a 13% gain in profits for s&p 500 names in 2011. that compares to the hefty 38% expected for 2010. >> you're going to see far less of a contribution coming from you know gains through cost- cuttings, and i think you're going to see more of the lifting being done from the fact that they're going to be able to drive better bottom-line numbers just by better performance of their core businesses. >> reporter: despite this year's anticipated slowdown, corporate profits have largely recovered to levels seen before the financial crisis. strong productivity and sales to emerging markets are also helping companies with their bottom line. suzanne pratt, "nightly business
report," new york. >> tom: among the investment themes that has gotten a lot of talk already this year is dividends. and tonight's "street critique" guest has some less obvious dividend ideas. she's hilary kramer, editor at gamechangerstocks.com. she joins us from the nasdaq. your first -- >> tom, it is a pleasure to be here. >> tom: the first dividend idea, dividend real estate trust, had a
nice rally and a selloff. and it focuses on computer data centers. why do you like this at a 4% yield. >> this is all about cloud computing. this is where you want to be, the large data centers. there is millions of square feet of need for data storage. it is going into the cloud, but really it is going into the warehouses, tom. a great stock to ongoing forward for 2011. >> tom: and you're going international looking for your dividends, into china with netstar chain. 7% yield. this being a chinese-based company, could that be risky? >> absolutely. this is all about risk and potential reward. you're dealing with china. the stock dropped off. the c.f.o. resigned, and the controller took over. the stock got hammered. it is the c.v.s. of china. >> tom: with a container shipping company called
horizon lines. 4% yield. microcap, though, less than $200 million market value. is that risky? >> horse lines is a great stock to own. i have it for the long-term. shipping has been an area that has done very poorly. now with the manufacturing index being at a high since june 2009, it's at 57 right now, there is lots of goods being shipped. this is the largest ocean shipping company in america, and they're part of the jones act, so they have exclusivity for puerto rico, guam, with the united states. i would really own this one. that whole sector is coming back. >> tom: a couple of predictions you had last week, china petroleum up 5.6%, and citigroup up 4%. wen got an e-mail on citigroup. dean wrote us, with citigroup approaching $5 a share, where do you see this stock in five to 10 years. how about a price target? >> this could be easily a
$30 stock in five years. citigroup is a great one to own. there is no more competition like there was. and the banks are stronger than they were before the credit crisis. and citigroup expanding in china, india, and africa ka. you want to own it if you have a five-year timeline. >> tom: "why don't you ask ms. kramer about one of her previous recommendations, tell vin, t-e-l-v-i-n. >> it's a spanish company, but they do remote meters. it is the easy pass, the fun pass. this is a company that has commercial applications. t.l.b.t.isn't is a good one to own. >> tom: hil hilary, do you own everything we mentioned tonight? >> yes. >> tom: you can send us
an e-mail at "street critique".com. and we'll feature some your questions next week. our guest this evening on street critique is hilary kramer, gamechangerstocks.com. >> susie: here's what we're watching for tomorrow: quarterly results from constellation brands and monsanto. and the latest sales at chain stores. we'll see how december rang up for retailers, and what that means for retail profits. we'll also look at the latest technology trends and cutting- edge gadgets from the consumer electronics show in las vegas. if you think tablet computers like apple's ipad are popular now, just wait. research firm the yankee group predicts tablet sales will nearly triple over the next three years. part of the reason for the surge? prices may drop significantly. right now, an ipad can cost as much as $800. researchers see tablet prices falling to around an average of $200 over the next three years.
>> tom: there's more turbulence tonight between american airlines and online ticket companies. sabre holdings, a global reservation system for the travel industry, said today it would stop carrying american's flight information in august. that's a month earlier than the contract was supposed to end. american is focused on its own system to share prices, and the move is alienating online travel agents. for instance, orbitz and expedia have already dropped american's fares from their search engine displays. h h h d!b @ e"
>> susie: cruising your way through retirement or working to the bitter end-- how will you spend your golden years? eric schurenberg has a few thoughts on that. he's editorial director at cbsmoneywatch.com and editor-in- chief at bnet.com. >> recently the mutual fund company t. rowe price circulated a novel retirement-planning illustration. take two people at 60. one stops saving in his 401(k) and spends the money on cruises until he retires. the other saves like mad for the rest of her working life. the easy liver retires with 70% more income for not saving. now, there's a catch here, obviously. the rich retiree stopped saving, but didn't stop working until age 70. the diligent saver retired at 62.
and therein lies a retirement saver's most hopeful-- and most maddening-- dilemma. hopeful? because you can make up a lot of lost ground by working longer. working longer is your trump card. it gives your savings more time to grow. it means you have to live off those savings fewer years, so you don't need as big a nest egg. and every year you postpone taking social security, your benefit grows. now the maddening part. working longer isn't entirely up to you. surveys show that 40% of retirees left work years before they wanted because of illness or layoff. another problem: in the illustration we just mentioned, the planners assumed that the richer retiree earned 7% on his existing savings while he went on cruises. who counts on 7% returns any more? which brings us back to the only strategy that makes sense in an uncertain world. work like you'll stay on the job forever. save like you'll be on your own tomorrow. i'm eric schurenberg.
>> tom: that's "nightly business report" for wednesday, january 5. i'm tom hudson. good night everyone. and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org